Seoul: Many individual investors in the Korean stock market, possibly millions, are facing a financial catastrophe after betting heavily on AI stocks, particularly Samsung and SK Hynix, which have been pivotal in producing memory chips essential for global AI advancements.
According to Thai News Agency, these investors are primarily speculators engaging in margin trading, a method allowing them to purchase significantly more shares than they could afford with their own capital. This strategy yields substantial profits when stock prices soar but results in severe losses when they plummet. The allure of quick gains attracted countless individual Korean investors, turning many into "millionaires" as the stocks of Samsung and SK Hynix witnessed a meteoric rise. Their combined market capitalization now accounts for more than half of the entire Korean stock market. However, the volatile nature of these stocks meant that a single-day drop of 10% was not uncommon, leading to instant financial losses for some investors.
Despite these fluctuations, most investors continued trading, confident in the stocks' resilience and potential to recover. This pattern persisted until June 2026. Starting July 2026, the market took a sharp downturn, triggering a "circuit breaker" when a 10% drop in the Korean stock market index forced the halt of trading to curb investor panic. The situation reached its climax from July 28-30, with the stock market index plunging 17.2%. This downturn led to "forced selling" for nearly a million investors, wiping out their investments almost entirely.
The situation took a dramatic turn on July 31, 2026, when the stock market index rose by 17.9%, marking the "highest single-day gain in history" for the Korean stock market. For long-term investors who weathered the storm without selling their shares, losses were minimal, experiencing only a 2% dip in profits during the tumultuous period.
The Korean stock market had been sluggish for over a decade, with the index barely increasing by 20% from 2014 to 2024. Political instability and poor corporate governance were significant factors contributing to this stagnation. However, the stock market began recovering rapidly in early 2025, spurred by the resurgence of tech giants like Samsung and a dramatic political shift. The ousting of President Yoon Suk-yol and the election of Lee Jae-mung, who promised to address the "Korea Discount" and promote local investment, fueled this recovery.
Under Lee's presidency, the Kospi index soared by 75% in 2025, reaching his target of 5,000 points within months. The momentum continued into January 2026, with a 24% surge driven by Samsung and SK Hynix stocks. By February 2026, the index climbed further to 6,244 points, with the two stocks likely gaining over 40%.
The stock market paused in March 2026, with a 19% drop in the index, but retail investors remained optimistic. April saw a resurgence, pushing the Kospi index to 6,599 points, while May witnessed a "Euphoria" phase, with the index reaching 8,476 points. However, a sharp decline followed on June 22, causing concern among investors.
July 2026 saw a convergence of fear, panic, and surrender among speculators. Rapidly falling stock prices led to margin calls and forced selling, driving the Kospi index to a low of 5,593 points. The rebound to 6,595 points on July 31 was little consolation for those who had lost their fortunes.
The events underscore the dangers of speculation in stock markets, especially during periods of extreme volatility. As history has shown, the cycles of booms and busts are inevitable, and the psychology driving them remains unchanged. Avoiding speculation and greed during market booms is crucial to mitigating such financial disasters.